Pathways towards instability in financial networks.

ABSTRACT: Following the financial crisis of 2007-2008, a deep analogy between the origins of instability in financial systems and complex ecosystems has been pointed out: in both cases, topological features of network structures influence how easily distress can spread within the system. However, in financial network models, the details of how financial institutions interact typically play a decisive role, and a general understanding of precisely how network topology creates instability remains lacking. Here we show how processes that are widely believed to stabilize the financial system, that is, market integration and diversification, can actually drive it towards instability, as they contribute to create cyclical structures which tend to amplify financial distress, thereby undermining systemic st

SUBMITTER: Bardoscia M 

PROVIDER: S-EPMC5321761 | biostudies-literature | 2017 Feb

REPOSITORIES: biostudies-literature